The State of California, like many states, charges its residents a lower "in-state" college tuition rate than it charges students who travel from other states. One justification is that the residents of the State have been paying taxes for years, taxes which support some of the university expenses, and thus they are entitled to a lower fee compared to students from elsewhere who have not been paying those taxes.

But California, also like some other states, gives the preferential "in-state" tuition rate to illegal aliens who have been in the state for a limited period of time. Specifically, California Education Code § 68130.5 established that an illegal alien who has attended a California high school for at least three years is eligible for the lower in-state rate at a state university.

This conflicts with Title 8 of the United States Code Section 1623, which includes this provision: "Notwithstanding any other provision of law, an alien who is not lawfully present in the United States shall not be eligible on the basis of residence within a State … for any postsecondary education benefit unless a citizen or national of the United States is eligible for such a benefit (in no less an amount, duration, and scope) without regard to whether the citizen or national is such a resident." In other words, no American should receive fewer educational benefits than what illegal aliens receive.

Several students of California universities who were charged the higher nonresident tuition under California law sued, essentially alleging reverse discrimination against them compared to the illegal aliens. This suit alleged that the California law giving the aliens a preference is "preempted" and nullified by the federal law. This suit also asserted a violation of the American citizens' constitutional rights to equal treatment, as these out-of-state students were being charged more than illegal aliens.

The trial court dismissed the entire complaint brought by the student-plaintiffs, and they appealed.

The Pacific Legal Foundation filed an amicus brief in favor of the student-plaintiffs, showing that there are some taxpayers who cannot afford to send their own children to college but end up subsidizing the college education of illegal aliens who benefit from the low in-state tuition. On the other side of this case, however, were far more individuals and groups defending lower in-state tuition for illegal aliens: amicus briefs were filed by groups named Improving Dreams, Equality, Access and Success at U.C. Davis, Improving Dreams, Equality, Access and Success of UCLA, and the National Immigration Law Center, and by eleven mostly anonymous individuals.

Perhaps surprisingly, the California Court of Appeal unanimously reversed the trial court and held in favor of the student-plaintiffs, at least to the extent of allowing them to reinstate their lawsuit. The appellate court held that federal law prohibiting this preference for illegal aliens may indeed preempt the state law. The appellate court also held that the plaintiff-students do have a constitutional claim for reverse discrimination for being charged more than the illegal aliens were charged. Martinez v. Regents of California, 166 Cal. App. 4th 1121 (Cal. App. 3rd Dist. Sept, 25, 2008).

Then the California Supreme Court granted a petition for review of this decision, casting doubt on whether this strong appellate decision against preferences for illegal aliens will stand. But the conflict between federal and state law may take this case all the way to the U.S. Supreme Court, which would make this the biggest legal case in decades concerning educational benefits for illegal aliens.

This case could eventually present the U.S. Supreme Court with an opportunity to overturn the 5-4 decision in Plyler v. Roe (1982), which opened the floodgates to illegal migration by requiring all public schools to enroll illegal aliens for free. Only one Justice, John Paul Stevens, remains on the Court from the narrow five-Justice majority in that decision, and it seems doubtful that there are now five votes now to affirm that much-criticized decision.